Buying your first home is an exciting yet intimidating experience. The entire journey is filled with emotions and hurdles and victories but it can feel a little bit overwhelming at times. The Inland Empire is full of wonderful cities with so much to offer different types of needs. From the historic districts of Riverside to the horse properties of Corona and everything in between, there really is something for everyone.
Before you take on the challenge of buying your first home, it is helpful to have some first-time homebuyer tips handy to help you navigate the process. If it has been a while since you bought your last home, these tips will bring you up to speed on what it will take to become a homeowner again.
Tips For First-Time Home Buyers
Homeownership means you will be on the hook for repairs and maintenance on your home. And if you need a mortgage to buy a house, make sure your financial house is in order before you start shopping for a mortgage. Your credit score needs to be in good shape while saving for a down payment and looking for your next home. It is a lot of to think about, but you do not have to do it alone.
We have pulled together some of our best tips from our industry professionals to help you get your foot in the door and avoid common mistakes new buyers make.
1. Establish a Realistic Budget
Before you start looking at available homes or talking to a lender, you also need to establish a budget that will work for your current financial situation. Decide how much you would feel comfortable spending on a mortgage.
When qualifying potential borrowers mortgage lenders calculate the borrower’s debt-to-income ratio. Lenders divide your total debt, including your mortgage payment, by your gross income to determine your maximum debt-to-income (DTI) ratio. Although lenders may approve you for a DTI ratio as high as 50%, the Consumer Financial Protection Bureau (CFPB) recommends capping it at 43%, to leave room in your budget for unplanned expenses or reductions in income.
When developing this budget, take into account other factors, like your current bills and savings plan. You definitely still want to put some money aside in case something needs to be fixed around the house. Also, consider additional fees that may come with buying a home, such as Homeowner’s Association (HOA) fees and insurance.
2. Maintain Your Credit
It is important to really tackle your current finances before you begin the long process of buying a home. A buyer’s credit score can affect their interest rate and it can determine the type of loan they qualify for. The higher the credit score, the more favorable interest rates will be. Mortgage lenders use a borrower’s credit score to evaluate how risky it would be to lend that person a substantial amount of money for a home.
Look at your current debts and payments and work on paying off any existing lines of credit. After all, paying down your debts will boost your credit score, thus making you a prime candidate for a loan.
Avoid changing jobs, charging new credit or making large cash deposits before your closing — your loan could be denied before you ever get to the closing table for doing so. When you apply for mortgage pre-approval, lenders will pull your credit report. And they’ll do it again before you actually close on the house and mortgage. If they see a new line of credit or another loan; discover that your credit balance has increased; or realize you are making late payments, you could be at risk of not getting the money you need for the home of your dreams.
3. Save For Your Down Payment and Other Costs
Save as much money as you can right now. Between the down payment, closing costs, and moving expenses associated with buying a home, it is important to save as much money as you can — and as early as you can.
There are several upfront costs involved in buying a home that you might be responsible for besides the down payment, such as:
- Closing costs
- Property taxes
- Homeowners association fees
- Homeowners insurance premiums
- Home inspection payments
4. Research the Available Loan Options Before Applying
Before you make a decision, make sure you have spoken to different banks and compared the costs. Try to do this even before you make a decision so as you’ll have plenty of time to make a comparison. The type of loan that you choose will help determine your down payment and what kind of home you can afford, among other things. There are multiple types of home loan options out there.
If you’re a first-time home buyer, then you have probably never shopped for a good interest rate for a home loan. Like we mentioned before, there are a lot of different types of mortgage loans available to new homeowners. Of course, the cost of service matters, but you’ll also want a lender with good customer service and a variety of mortgage options to choose from.
5. Complete Your Pre-Approval Before Starting the Search
It can be tempting to jump right into hunting for the perfect house, particularly if this is your first time. It’s a really good idea to get a mortgage preapproval before you begin comparing properties. You should have a pre-approval letter from a lender that will tell you exactly how much of a loan you can receive. It is based on your finances, with a lender having a deep look at your W-2s, bank statements, and credit score.
Some people may get a pre-approval letter and the pre-qualification process confused. A pre-qualification is simply an estimate of the amount of a home loan you could receive based on a brief look at your income and other information.
Prequalification letter: A prequalification is an estimate of the amount of home loan you can get. It’s based on an informal evaluation of your income and other information.
Preapproval letter: A mortgage preapproval is a document from a lender that tells you exactly how much loan money you can get. It’s based on your financial information, such as W-2s, bank statements and your credit score.
6. Create a Must-Haves And Deal-Breakers Checklist
You may have always dreamed of a home with three bedrooms, a spacious yard and a white picket fence, but have you thought about what you really need in a home? Before you begin touring houses, take inventory of what you will need in your new home. A list of must-haves and a list of deal-breakers can help you determine the right place for you. In a high-pressure seller’s market, you may feel rushed to make decisions. Keeping detailed notes throughout your home search will help you make better choices for your future.
Below are some ideas you may want to include in your checklist. Share your findings with your real estate agent to make sure they know which homes are hitting the mark and which ones are falling short.
- Number of bedrooms
- Number of baths
- Storage space
- Yard size and layout
- Energy efficiency
- Neighborhood safety
- Nearby businesses
- Commute
- School ratings
- Local ordinances for animals
7. View as many houses as you can
It is perfectly normal to get excited when you view a house that fits your criteria. But we advise our clients to be patient. Make sure you view other houses too before you make a commitment. This will also give you the chance to make a comparison. Make sure you examine the neighborhood properly. Visit the shops and supermarkets. Consider the traffic on your potential street. Is it a quiet area? Are there any parks nearby? Take a long walk around the neighborhood at different times of the day to get a better insight.
8. Have a Home Inspection Done
A home inspection is a vital part of the process. You want a qualified inspector to check out your potential home before you sign anything. A home inspector will check the house for any potential safety hazards or problems that need to be addressed. And, if repairs are needed, they may even be able to give you an estimate of the costs you will be facing should you move forward with your purchase.
The inspector will also have knowledge of home maintenance and what tasks should be done on a monthly, quarterly or annual basis. With that information, you may be able to renegotiate with the seller about any needed repairs — or at least pay to get them done ahead of time. After all, you want to prevent surprises down the road as much as possible.
9. Work With A Trustworthy Real Estate Agent
Most Americans will purchase a home or two in their lifetime, some none at all. A good real estate agent will search the market, find a home that fits your needs, and will assist you with the negotiation and closing process. When speaking to possible agents, inquire about their experience working with first-time homebuyers in your area and how they intend to assist you in your search.
A real estate professional can help by:
- Showing you properties in your area that fit your needs and budget
- Attending showings with you to learn more about your priorities as a homeowner
- Helping you decide how much to offer for a property
- Submitting an offer letter on your behalf
- Helping you negotiate with the seller or the seller’s agent after you submit an offer
- Attending the closing with you to make sure that everything is in order with your sale
Find the Right Agent
Buying your house should be a fun and fulfilling experience. If you have done your research and evaluated what you can afford and what you truly need, finding a new home can be exciting. Learning more about the purchase process eliminates the fear of the unknown and lets you search for a home with peace of mind.
Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.
Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002